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What is the Difference Between Joint Tenants and Tenants in Common in Property Ownership?

By Pamela Tieu 21/09/2017

Have you ever heard of the terms “joint tenants” or “tenants in common” when looking to purchase a property jointly with another person? These two terms will most probably be encountered by you when you are purchasing a property with someone else.

In Queensland, section 33 of the Property Law Act 1974 (Qld) governs the situation where 2 or more persons hold any property and/or an interest in any property. The two methods of joint ownership are for the joint owners to hold the property either as joint tenants or as tenants in common (or a combination of the two).

  • Generally Joint Tenancy is the family arrangement, and Tenants in Common is the business arrangement. However this is not always the rule.
  • For example if you are purchasing property with your spouse the two usually purchase as joint tenants BUT this is not always the case. A common mistake many law firms make is to simply list the husband and wife purchasers as “joint tenants” without asking the clients beforehand which type of co-ownership they prefer . We shall discuss why this may potentially be an issue later on.

So what do the two terms mean?

Joint tenancy and tenancy in common allow two or more people to share ownership of property. The main differences relate to how the co-owners hold their shares. To fully understand the terms one must look at the rules regarding the creation of co-ownership, particularly, what happens when a co-owner dies and the co-ownership is otherwise brought to an end.

Joint tenancy

  1. In a joint tenancy each ‘joint tenant’ has a right, SHARED with the other joint tenant(s) to the whole of the property. The ownership of the property is not conceived as being the holders owning separate shares, but rather as a joint ownership of the whole property by the joint tenants.
  2. There are matters which relate to a jointly held property, these include;
  3. Survivorship

When a joint tenant dies, then the interest that the deceased joint tenant held is automatically extinguished and the surviving joint tenant(s) takes over the share of the deceased tenant. This occurs even if the joint tenant leaves a will and attempts to leave his/her share to a person other than their joint tenant (for example to their children or a close friend).

Only when the last surviving joint tenant passes away, shall the interest in the property go to the estate of the last surviving joint tenant.

As mentioned before, this potentially poses a problem to people who purchased a property jointly without having differentiated between owning the property as “joint tenants” or “tenants in common”.

The only way to avoid this is to ‘sever’ the joint tenancy while all the joint tenant are still alive. This means that the joint tenants transfer the property to themselves, this time however as tenants in common.

For example, in a Joint Tenancy situation. A (husband) & B (wife) are married and own their home as joint tenants. A & B have 3 children. B had a will drawn up to say that if she passes away then she wants her share of the home to be divided equally to her 3 children. However, as A & B own their home as Joint Tenant and if B passes away first then A will receive 100% interest in the home no matter what B’s will says. Then when A eventually passes away then the home will be distributed in accordance with A’s will. However if A remarries or has more children after B’s death, then B’s interest in the property may not end up only being benefited from by B’s children as she had hoped.

Tenancy in common

When joint holders hold as tenants in common then each co-owner has a SEPARATE share in the land. The shares do not have to be equal in size, which means that each of the owners could hold a separate proportion of the property. For example you could be a tenant in common with another owner but only have a 10% share, and accordingly the other owner(s) would hold the balance 90% share in the property. This is the main difference between a tenancy in common and a joint tenancy. In a Tenancy in common each tenant owns a specific share of the property. There is no ‘right of survivorship’ which means that when a tenant in common passes away, then the interest which that person held in the property passes to their estate and passes on in accordance with their will (or their heirs if there is no will).

This means that each individual owner of the property is entitled to leave their interest in the property to any persons they wish.

Owning property as Tenants in Common does not preclude one owner from leaving their interest in the property to the other co-owner if that is their intention but it gives the owner the option of leaving the property to any other person who will then take up the share that the deceased owner held in the property.

Severance

So what if you already own a home jointly with someone else? Is there anyway for you to find out whether you own it with them as joint tenants or tenants in common? Luckily, yes there is! You or your solicitors can undertake a simple “title search”, which will let you know which type of co-ownership is registered on the title of your property.

It is also possible to change the type of co-ownership on the title if you so wish. You can either change it to or from joint tenancy (joint tenants) to tenancy in common (tenants in common) or vice versa.

You can contact our firm should you require any further information on this matter or if you have made up your mind to change the type of ownership under which you hold the property.

Common Mistakes

In our experience, many young couples purchasing a property together when asked about how they wish to hold the property will elect ‘Joint Tenants’ as they think this is more simple and if one partner dies the surviving partner takes the property without the requirement of having to have a Will.

However, many years later when the couple have children and decide that rather than leaving the property to their partner they want to leave their share in the property to their children it cannot be done unless the joint tenancy is first severed which can be achieved if both parties are alive but the severing of the tenancy can be a costly exercise which could have been easily avoided if the parties had thought things through at the initial stages when they brought the property.

In conclusion

So wrapping up, there are two types of co-ownership: joint tenancy and tenancy in common. Issues may potentially arise if you don’t specify what type of co-ownership you prefer when instructing your solicitors during a conveyancing matter, particularly if you have a will and want to leave your interest in the property to someone other than your co-owner.

Hopefully now that you know the differences between the two types of joint ownership when next time you set out to purchase a property it is a good idea to consult with your solicitors to ensure that you achieve the type of co-ownership you want.

DISCLAIMER:

This material is produced by T Lawyers. It is intended to provide general information in summary form on legal issues, current at the time of publication. This material has been prepared without taking into account your objectives, situation or needs. The contents do not constitute legal advice and should not be relied upon as such. Proper legal advice should be sought in particular matters. T LAWYERS PTY LTD disclaim all and any guarantees, undertakings and warranties, expressed or implied, and shall not be liable for any loss or damage whatsoever arising out of or in connection with any use or reliance on the information or advice on this material

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Pamela is the Practice Director of T Lawyers Pty Ltd. Pamela graduated with a Bachelor of Laws and a Bachelor of Business from Queensland University of Technology.